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Market research firms Gartner and Forrester are now forecasting
what channel resellers have known for a while – the economy amid the current
recession is even gloomier than previously thought.

Gartner’s newly revised forecast for 2009 now says that
global spending on information technology (IT) will decline by 3.8 percent. The change represents just the most recent
downgrade in Gartner’s IT spending forecast which the company has been lowering
for months now. In October 2008, Gartner had forecast that IT spending would
rise by 2.3 percent in 2009, and in February 2009, Gartner said it expected IT
spending to increase by 0.5 percent in 2009.

Forrester also revised its forecast for U.S.
business and government purchases of IT goods and services in 2009, now saying
they will decrease by 3.1 percent this year. Previously, Forrester had projected a 1.6 percent annual increase for

Forrester says that it expects all sectors of the tech
economy will decline, with the exception of outsourcing.

Both these forecasts indicate that IT spending will be even
harder hit than it was following the dot-com bust when it fell by 2.1 percent

Both Gartner and Forrester say the decline in the overall
economy is causing the IT spending pull back.

“IT organizations worldwide are being asked to trim budgets,
and consumers are cutting back on discretionary spending,” says Richard Gordon,
research vice president, and head of global forecasting at Gartner, in a
prepared statement issued by Gartner. “The speed and severity of the response
by businesses and consumers alike to these economic circumstances will result
in an IT market slowdown in 2009 that will be worse than the 2.1 percent
decline in IT spending in 2001 when the Internet investment bubble burst.”

Gartner says that forecasts for all four of its key market
sectors – hardware, software, IT services and telecommunications – have been
revised downward, with only software spending growth holding onto a tiny
increase of just 0.3 percent for the year.

Gartner now says that computing hardware sales will decline by 14.9 percent, IT
services sales will fall by 1.7 percent and telecom sales will fall by 2.9

Forrester reports a similar gloomy picture.

Forrester’s forecast calls for computers and peripheral
equipment sales to decline by 6.7 percent in 2009, communications equipment
sales to fall by 7.7 percent, software sales to fall by 0.4 percent, IT
consulting services sales to fall by 1.9 percent and IT outsourcing sales to grow
by 2.1 percent in 2009

“The U.S.
recession keeps getting worse than we and many economists had expected,” writes
Andrew H. Bartels in the Forrester forecast report. “Instead of the 2 percent
to 3 percent drop in real GDP that the U.S.
experienced in the 1990s and 2001 to 2002 recessions, U.S. real GDP
fell by more than 6 percent in Q4 2008 and will fall by a similar amount in Q1
2009, with more (although lesser) declines until the end of 2009.”

Forrester says that drop is reflected in tech purchases.

“Computer equipment purchases will continue to bear the
brunt of cutbacks in tech investment, but purchases of network equipment,
software licenses and IT consulting services will also drop,” Bartels writes.
But there’s good news, too. “As the U.S.
economy starts to recover in late 2009, IT purchases will revive strongly with
strong growth projected for 2010.”

Forrester is calling for a recovery in 2010, with computer
and peripheral sales to grow by 8.8 percent, communications equipment sales to
grow by 4.8 percent, software sales to grow by 6.3 percent, IT consulting
services sales to grow by 7.4 percent and IT outsourcing sales to grow by 6.5

The credit crunch has impacted IT capital purchases very
hard, according to Forrester.

“In many ways, the biggest factor impacting the tech market
is not the recession, it’s the breakdown of the financial system,” Bartels
writes. “Companies large and small have been shut out of credit markets, and
even those that still have access to bank loans, markets for commercial paper
or corporate bonds often have had to pay much higher interest rates.

“Businesses have responded by going into a cash-hoarding
mode, with big and dramatic cutbacks in all forms of capital investment. Since
many IT goods are in the capital budget, IT markets have taken a
disproportionate share of the capital investment collapse.”

Forrester also offered this caveat of an alternative scenario — that the recession will last well into 2010.

"That scenario, which we put at a 25 percent probability, would
arise if efforts to recapitalize the financial sector break down,"
Bartels writes. "Should this happen, U.S. tech purchases would decline
by as much as 6 percent in 2009 and further by 3 percent to 4 percent
in 2010."